Look up in Times Square and you’ll see the earliest version of a banner ad. Real estate developers pay massive sums to secure air rights for the empty space above buildings. Monetizing by building up (as opposed to out) in crowded areas like Manhattan, they also get to dictate what advertisements appear in the air that they control.

Augmented reality (AR) has made it possible for this same paradigm of advertising to exist via your smartphone. Multiple apps feature the ability for ads to appear on your mobile screen as miniature virtual billboards assigned to GPS coordinates. Brands can tag the real world via this "Outernet," and if they sponsor the AR browser you’re using, in essence they own the virtual air rights (VARs) for everything you see.

Eyebrawl

So what’s to keep multiple brands from owning the same virtual space? Currently, nothing. Services like Tagwhat let anyone create video, photo or text messages they can attach to specific coordinates. But just like the desktop web, top AR browsers like Junaio and Layar are becoming augmented equivalents of Internet Explorer and Firefox.

Smart brands will also encourage the use of a preferred browser via value-added incentives for users. Imagine the year 2013, where the official SXSW mobile app is enhanced with AR browser Junaio. Attendees will download the app, as it’s the only way to see exclusive video content available on the virtual banners behind speakers. Brands will sponsor the app, and attendees will be entertained between panels with clickable content they can share with their social graph.

Google’s Vision for Goggles

Google Goggles is a paradigm shifter for how we’ll all come to look at the world, and has evolved to become the dominant player in visual search. In the same way it guides your online queries, Google wants to help define what you see in the real world and monetize the process.

It’s impossible to underestimate the impact of visual search. Once the general public gets used to navigating their physical environment with tools like Goggles, all of what we see and share will become searchable data. And when we combine consumer preference with predictive technology, Google will be able to serve visual experiences that benefit consumers and advertisers because of their unique specificity.

In this way, Google will own the virtual air rights within Goggles. However they decide to define this visual version of AdWords, brands will flock to invest so that their messages will come into a consumer’s vision at the perfect place and time. Coupled with its new Offers technology, virtual incentives will only increase.

Like most technologies, people will only adopt Goggles when there is enough utility or value. QR codes and apps like stickybits have paved the way for people to get comfortable with "screening" the real world.

Bing Bling

Here’s an example. Bing’s augmented reality maps let you see the world as if you were walking through it, versus looking at a photo from above. Picture a bus stop where in the real world you see a poster with an ad for Coke, but in Bing's virtual version, the poster shows an ad for Pepsi.

Google filed for a patent along these lines in early 2010 that would allow it to sell ads in the Street View feature of Google Maps, potentially replacing signage that was originally photographed. And as most geeks feel the next step for AR is a wearable display (your smartphone as glasses, as seen here from company EON Reality), the importance of virtual real estate may quickly supplant actual signage for advertisers. This is especially true when virtual signage could be switched dynamically for individual eye traffic depending on a viewer’s preferences.

“I like what Bing Maps has done, as it offers a glimpse into what virtual advertising may soon look like,” says Gabe Greenberg, director of social and emerging media at Microsoft. “The industry might debate if consumers will want to be presented with ads in this format, but if the experience presents the ads in a way that makes sense for the augmented reality experience and the user’s intention, this could be a powerful advertising tool for tomorrow’s marketplace.”

Microsoft’s Kinect technology is also a game-changer when it comes to how ads might get served in the virtual arena. In the future, consumers may enable data collection about their behavior on the couch. In this way, they could see ads in the real world (via their AR-enabled phones) that mirror their media preferences in the living room — sort of like a more targeted version of product placement. These preferences could inhabit shop windows, billboards or posters on bus stops.

Monetizing the Matrix

“We think virtual advertising is a fascinating topic and potentially poised for high growth,” says Anna Bager, vice president of the IAB Mobile Marketing Center of Excellence. “And just as the IAB helped define the taxonomy of web advertising via banners, we will be ready to work with industry leaders to provide a value-added vision for the virtual future. While this is an exciting new advertising medium for brands, consumers will only want messages on an opt-in basis.”

Bager raises a significant point — VARs will also apply to individuals. Etiquette around privacy will evolve, so consumers will dictate if or when their data can be shared. Consumer actions in real time (aided by facial recognition tech like Viewdle) may become the stuff of Facebook Sponsored Stories 2.0. And right now, people can’t opt out of Sponsored Stories. This logic muddies privacy issues as well as the question of where Facebook should be able to monetize. If Coke makes money when someone scans me in real time via augmented reality, should I get a cut? The answer will likely be yes, but Facebook might only reward me with virtual currency rather than real money.

Once these issues are sorted out, there will be multiple benefits to AR-enhanced image recognition. Here are a few:

At a business conference, you’ll scan the room to recognize people you want to meet.

At a club, you’ll scan the room to see who you might want to date. And forget sending them a drink — "bump" them some FarmVille cash via your NFC-enabled mobile to make a first impression.

At the supermarket, you’ll scan shelves, to only see products that match your preferences — e.g. if your child has a peanut allergy, breakfast cereals you need to avoid will literally disappear.

At a retail store, brands will modify end caps and shelf talkers to adapt to your preferences.

Advertisers have put messages in our field of vision for decades. The paradigm of virtual air rights simply extends that practice via augmented reality. The life-as-product-placement model means ads will evolve to become content we choose to experience on our own terms. What’s still to be worked out is who gets the rights to what.

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